Expect More from this round of negotiations
Incendiary rhetoric related to main agreement negotiations has been a recurrent issue post 2010 and as this year’s negotiations approach, expect more of it.
In an economy hit by double-digit contraction, battered by an unprecedented and alarming jobless rate and languishing in sub-optimal economic growth, what should the key stakeholders - organized business and labour – be doing to lift SA and this sector out of this mess? Are stakeholders capable of reaching common cause in order to turn things around or as we have come to expect, will employers and labour simply not be able to find one another where it matters most – at the negotiating table. Who would have imagined almost three decades into our democracy we still need to resort to strikes and lock-outs to resolve our differences? Collective bargaining in its crudest form is almost always about power and ideology and stubborn leaders convinced that they are right.
Our disillusionment with the system, the country and the future is a normal response and should be acknowledged. But once that’s done it does not help to dwell on the negatives. This should not be taken as naive optimism, just a realistic acceptance that things are indeed tough at the moment, but we will get through. Never waste a good crisis, they say. This industry has certainly been, and is still in the midst of a number of crises. Surely, opportunity must abound? Indeed, but in the collective barraging space, where business and labour are on opposite sides as adversaries, who has the courage to take the first step towards the middle? In any negotiation, presuming both parties are equally skilled, common interest plays a role in shaping the deal. Where common purpose cannot be found because of a perceived lack of mutual respect the deal will almost inevitably unravel.
In the metals and engineering industries the collective bargaining model has proven to be remarkably resilient. Undoubtedly it has come under sever scrutiny and strain over the last couple of years but it has survived and some would even suggest thrived. Resilience grows from taking constructive steps and building a common purpose. Without common purpose, crafting solutions to entrenched differences will remain elusive. It’s time for all role players to stand up and be counted. Notwithstanding our diverse ideologies as between business and labour and amongst business groupings, finding a way forward in tolerance and mutual respect is now, more than ever, desperately needed.
Insofar as this year’s round of negotiations is concerned, we know things will not be easy and the challenges facing us are many. South Africa’s economic outlook doesn’t look good and there is little business confidence. The notion of job retention and/ or job creation on the back of an alarming high unemployment rate fuelled by ongoing retrenchments and business closures, has become elusive.
Persistent load-shedding, the worst in more than a decade, shows no signs of ending. Spiking unemployment, widespread business failures and huge job losses point to negotiations this year taking place against a difficult economic landscape. It would be fair to say that only if labour and business find a way of working together do we stand a chance of turning things around. It’s also fair to say that the relationship between supporters and detractors of gazetted agreements remain strained. Litigation continuous and in all likelihood may well continue into the future.
Trust amongst all stakeholders must be rebuilt and the national discourse must find a way of transcending beyond purely wages and terms and conditions of employment. Once negotiations over wages and conditions of employment have been settled, the focus must urgently shift to more important priority interventions, where labour and business collectively can play a part in tackling the deep underlying failures preventing meaningful growth in SA and our sector.
- a long-term agreement;
- wages;
- gazettal and extension; and
- exemptions incorporating special phase-in dispensation.
Initiating Negotiatons for the Amendment of an existing Agreement in terms of Clause 10 and Annexure E of the MEIBC Constitution
25 March 2024
Mr. Sicelo Nduna
General Secretary
MEIBC
Facsimile: 086 636 8690
Email: sicelon@meibc.co.za
Dear Mr Nduna
INITIATING NEGOTIATONS FOR THE AMENDMENT OF AN EXISTING AGREEMENT IN TERMS OF CLAUSE 10 AND ANNEXURE E OF THE MEIBC CONSTITUTION: CONSOLIDATED MAIN AGREEMENT
SEIFSA, acting in accordance with the mandate of the member Associations contained in the attached schedule, request you, in accordance with Clause 10 and Annexure E (2) of the MEIBC Constitution to convene a negotiating meeting at your earliest convenience.
Insofar as this year’s round of negotiations is concerned, we know that things will not be easy and the challenges facing us are many. South Africa’s economic outlook doesn’t look good and there is little business confidence. The notion of job retention and/ or job creation on the back of an alarming high unemployment rate fuelled by ongoing retrenchments and business closures, has become elusive.
Persistent load-shedding, the worst in more than a decade, shows no signs of ending. Spiking unemployment, widespread business failures and huge job losses point to negotiations this year taking place against a difficult economic landscape.
It would be fair to say that only if labour and business across the board find a way of working together do we stand a chance of turning things around. It’s also fair to say that the relationship between supporters and detractors of gazetted collective agreements, like the Main Agreement, are strained. Litigation continuous and in all likelihood may well continue into the future.
Trust amongst all stakeholders must be rebuilt and the national discourse must find a way of transcending beyond purely wages and terms and conditions of employment.
Once negotiations over wages and conditions of employment have been settled, the focus must urgently shift to more important priority interventions, where labour and business collectively can play a part in tackling the deep underlying failures preventing meaningful growth in SA and our sector.
In light of the above the Associations federated to SEIFSA propose concluding an agreement which envisages affording industry an opportunity to re-set in an enabling environment underpinned by certainty, stability and industrial peace.
Industry negotiations over the years have created a set of comprehensive and favourable employment conditions for employees that are essentially unmatched across most bargaining councils. Hence, we do not wish to pursue any further amendments and/ or adjustments to benefits currently contained in the Main Agreement nor do we propose down varying existing terms and condition of employment. Equally important is our position on Section 37 of the Main Agreement i.e., that it must be retained.
Accordingly, we formally give notice that our approach to this year’s round of negotiations will be structured around four (4) broad principles or themes, namely:
- a long-term agreement;
- wages;
- gazettal and extension; and
- exemptions incorporating special phase-in dispensation.
As there is a nexus or connectivity between these four themes or business drivers, consensus must be reached on each of the drivers before an agreement can be considered.
We also propose that all outstanding issues be dealt with in-line with the provision as set-out in paragraph 6 of the signed-off Process Agreement and that this process commence immediately once a Settlement Agreement has been concluded.
In closing, it is our hope that the employer and trade union parties in the MEIBC will make every effort to successfully conclude the industry negotiations on or before the expiry of the current agreement on 30 June 2024.
We ask that you please bring the views of our member Associations, as articulated herein, to the attention of the party trade unions and the other employer organizations on the Council.
Yours Sincerely
Lucio Trentini
Chief Executive Officer
Cc: Elias Monage, SEIFSA President
Association Chairpersons
NEASA, CEO, SAEFA, (SA) UEO, FEOSA – by email
NUMSA; NUM, Solidarity; UASA – The Union; MEWUSA and SAEWA - by email
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The List of Registered Employer Organizations’ Federated to SEIFSA and Party to the MEIBC
Association of Electrical Cable Manufacturers of South Africa
Cape Engineers’ and Founders’ Association
Constructional Engineering Association (South Africa)
Electrical Engineering and Allied Industries’ Association
Electrical Manufacturers’ Association of South Africa
Gate and Fence Association
Hand Tool Manufacturers’ Association
Kwa-Zulu Natal Engineering Industries’ Association
Iron and Steel Producers’ Association of South Africa
Lift Engineering Association of South Africa
Light Engineering Industries’ Association of South Africa
Non-Ferrous Metal Industries’ Association of South Africa
Eastern Cape Engineering and Allied Industries Association
Refrigeration and Air Conditioning Manufacturers’ and Suppliers’ Association
S.A. Electro-Plating Industries’ Association
S.A. Refrigeration and Air Conditioning Contractors’ Association
S.A. Pump Manufacturers’ Association
S.A. Valve and Actuator Manufacturers’ Association
SEIFSA report outlines risks for Metals & Engineering sector in 2024
The outlook for the South African Metals & Engineering sector in 2024 is not as bleak as it was last year, but risks — both local and global — remain high, according to the State of the Metals and Engineering Sector Report 2024, which the Steel and Engineering Industries Federation of Southern Africa (SEIFSA) released this week.
The report, which was presented in a webinar on February 20, examines the current state of the Metals & Engineering (M&E) sector amid moderating inflation and heightened geopolitical tension.
SEIFSA chief operating officer Tafadzwa Chibanguza, says “the geopolitical temperature is high, with wars in Europe and the Middle East and the subsequent attacks in the Red Sea.”
Aggregate production increased by 1.7% in 2023, slightly higher than the 1.5% in 2022 but still remains 18% below where it was in 2008/2009.
“Production has also not sustainably attained its pre-Covid lockdown levels and has been oscillating between 1-2 index points around this level,” Chibanguza said.
This is amid the “expectation for global economic growth to flatline into the medium term, which presents a neutral perspective on demand prospects from the external environment. Growth is primary tilted in favour of the advanced economies, which presents limited export opportunities given that Sub-Saharan Africa is the largest export market for the sector,” says Chibanguza.
Geopolitical risks include the ongoing wars in Europe and the Middle East, while locally the sector faces persistent load-shedding, logistical challenges, including the crisis at Transnet, deteriorating service delivery at municipal level, looming wage negotiations and the uncertainty of an election year along with the political noise that leads up to the event, he says.
“Whatever the outcome of the election, it presents risk as a lot of work has been done in terms of macro-economic policy around for example energy and public procurement. . A new administration means dealing with new members of parliament and a new cabinet.”
On the positive side, inflation is subsiding faster than expected, particularly in the advanced economies, which should allow for hard currency rate cuts, which in turn should set the scene for global monetary policy, says Chibanguza.
Global inflation is set to decline from 6.8% in 2023 to 5.8% in 2024, and 4.4% in 2025, which should set the scene for interest rates to start coming down. Declining interest rates presents a scenario for investment in the economy to hopefully start picking up which in turn is a good demand source for the metals and engineering sector. It will also decrease the pressure on debt service costs for the state, possibly creating fiscal headroom, for state spend into the economy, which again is another important source of demand for the sector. Lastly, lower interest rates should also provide room for companies in the metals and engineering sector to increase investments into their operations, which is particularly important given the negative net investment trend that has underpinned the sector since 2008, which has also resulted in the sectors fixed capital stock deteriorating at a rate of 0.8% (CAGR) over the same period.
While work has been done to revive the economy, reforms take time for their full effect to be realised, but unfortunately the sectors potential will remain constrained for as long as too many local companies remain in survival mode due to the array of challenges they face.
Industry Wage Negotiations Kick-off
INDUSTRY WAGE NEGOTIATIONS KICK-OFF
Negotiations this year will take place against a very difficult economic background. The sector is still in the throes of deep distress. A fragile economy, spiking unemployment, widespread business failures and huge job losses will no doubt test our mettle.
On a positive note, talks-about-talks are already well underway and to date all the parties have signed-off on a process or relationship agreement and a declaration to negotiate in good faith. A pre-bargaining conference was held on 7 February and a negotiating timetable has been agreed. Whilst all this on the surface may not seem to amount to much, it is all unprecedented and hopefully a sign that the difficulties we find ourselves in are shared by our union counterparts.
In terms of the timetable the following has been agreed:
| Month | Process | Comments |
| 7th February | Pre-Bargaining Conference | Understanding Industry Issues and Challenges |
| 25th March
|
Submission and Exchanging of Demands and Triggering
Annexure E of the Council Constitution |
Finalize respective parties demands, exchange of demands and triggering
Annexure E |
| 10th April | Commencement
of Negotiations |
Commencement of negotiations |
| 24th April | Negotiations | Negotiations |
| 8th May | Negotiations | Sign-off |
You will observe we have set a tight time-line with the aim of settling early, within mandate and with minimal disruption. We understand how difficult this will be but this time round, parties are faced with a set of daunting circumstances that simply cannot be ignored. Manufacturing performance is anything but encouraging, persistently high interest rates, electricity outages, failing logistics and weak demand have all lead to a sector that is under siege.
Mandating, tactics and strategy will play a key role in delivering a sound agreement. We ask that member companies play their part in supporting their respective Associations who play an important role in formulating a consolidated mandate that allows the Main Agreement Negotiating Team to develop the tactics and strategy.
At the outset I extend a note of immense gratitude to all members of the 2024 Main Agreement Negotiating Team who during the process, will sacrifice an inordinate amount of time, effort and energy – over and above their day-to-day jobs – supporting the Office and me in ensuring that we meet the goals we have set.
This will be a difficult round but, in the end, we will succeed if we just stay the course.
Lucio Trentini
Chief Executive
Find the middle ground to avert collapse
South Africa’s metal and engineering sector, which is used as a measure of the overall economy’s performance is living through unprecedented times and we can confidently say we are facing a bleak year. The last three years have been extremely challenging and the next twelve months look set to be no less challenging.
The sector continues to face many risks and uncertainties such as the return of loadshedding, bottlenecks at Transnet’s sprawling logistics infrastructure and policy uncertainty ahead of the 2024 national and provincial elections. Confidence in South Africa is at a record low. And yet, the sectors recovery is crucial for the country’s economic prospects, as it has the potential to boost productivity gains for the economy, exports, investment, innovation and job creation. The number of ever-increasing unemployed people should instill a sense of urgency into fixing our economy. Failing that, we run the risk of entrenching the kind of poverty that can upend the social compact that underpins our democracy.
Times are tough in the country now. The news seems relentlessly depressing. Intense anger grows because so many of the problems closing businesses and killing jobs could have been avoided. Our disillusionment with the state of our country, industry and the future is normal, but once that’s registered, leaders across the board must find it within themselves to move the conversation beyond the doom loop.
Employers and trade unions at a Metal and Engineering Industries Bargaining Council (MEIBC) meeting on Tuesday, 30 January signed a landmark process or relationship agreement giving the green light for the commencement of the 2024 round of wage and conditions of employment negotiations under a set of rules, guidelines and guiding principles that to date have been absent from our engagements
Starting is easy, staying the course tests one’s mettle, finding common ground and closing the deal is a reflection of having found common purpose. But at the heart of the matter are the basis and nature of industrial relations in SA, which by definition place capital and labour permanently on opposite sides as adversaries.
In collective bargaining, only when the parties find sufficient intersections of common inputs to a solution to be generated is a deal possible. In a traditionally adversarial setting and particularly when the going gets tough and faced with the prospect of negotiations completely unravelling, the side that takes the first step towards the middle is most likely to get the best deal; if there is a middle.
This year industry negotiations take place against a landscape that is unprecedented. Bargaining partners are faced with a number of crises ranging from economic (energy, supply chain, inflation, interest rates etc.) socio-economic (rising unemployment, spiraling cost of living) and a macro and micro economic scenario that point to a sector that is showing very little prospects of real, meaningful, jobs rich, inclusive economic growth.
Yet, in spite of all these challenges the parties have signaled their intent to engage one another at the negotiating table. As a precursor to the formal engagement process the parties have framed in a signed agreement how they intend engaging and interacting with one another. Further, a pre-bargaining conference will be held in order to clearly understand the landscape industry finds itself, with the aim of understanding industry’s challenges, prior to each party returning to their respective constituencies for a mandate.
Parties this year have set themselves the ambitious target of settling withing the currency of the current agreement, which lapses on 30 June 2024. This amounts to an unprecedented achievement but then again, this industry is known for doing what most thought impossible.
In the final analysis, we have no option but to persevere, if we steadfastly stick to thinking we’re right and the other side is wrong, the centre won’t hold and collective bargaining will collapse. No common purpose, no industrial peace, no progress.
The process or relationship agreement brings together a spectrum of diverse ideologies between and amongst different employer and trade union groupings with the hope they can move forward in prosperity, tolerance and harmony, maybe impossible to imagine. But, as Lao Tzu so aptly puts it, "A journey of a thousand miles begins with a single step," an inspiring reminder of the importance of taking that first step, regardless of the obstacles that may lie ahead.
Steel and Engineering Sector on the Precipice of an Unprecedented Jobs Crisis
The employment trends in the metals and engineering sector are an important indicator for the underlying structural constraints that have plagued the sector for the last decade and a half. The sector currently employs 362 871 people, which is a significant drop from the 577 507 people employed in 2008. This equates to a decline of 214 636 jobs, or 37.2% and when measured on a compound basis, represents a 2.9% decline per annum over this period.
Employment in the sector has decreased at double the rate production has decreased over the same period. Considering the steel sectors induced economic multiplier of 2.7 times, the employment multiplier of 6 times and the dependency ratio of between 7 to 10 people relying on each formal job, the sectors employment trends spell wide scale social and economic disaster.
The steel and engineering sector is crucial to the South African economy, it is the backbone of the country’s industrial base which is akin to none on the continent. Apart from the traditional arguments of the virtues of the manufacturing sector which include the productivity gains to economic growth, higher income elasticity of demand for manufactured goods and the spill over of growth to non-manufacturing sectors in response to growth in manufacturing output, the steel and engineering sector is also a strategic avenue through which the country converts its vast mineral endowment to final engineered products. This locks in a higher degree of value add domestically.
The value chain represented in the sector constitutes the entire metals value chain from metal production (ferrous and non-ferrous), merchants and service centres, metal fabrication to heavy and light engineering. The sector is a crucial supplier of inputs into sectors such as agriculture, mining, the automotive sector, construction, the electricity supply industry across all its facets, logistics and water sectors. Moreover, the sector is export intensive, with 40% of total production being exported, raising the country’s foreign exchange receipts by USD $20 billion annually.
Despite the sectors far-reaching impact and diversified demand profile the innate potential is unfortunately not being realised. The recent announcement by ArcelorMittal South Africa (AMSA) on the closure of its operations in Newcastle and Vereeniging, as well as ArcelorMittal Rail and Structural bears testament to this. The prospect of this development materialising is a major cause of concern which will only add to exacerbating the downward spiral to employment in the sector.
The long products operations under consideration include the country’s only local mill capable of producing long steel from iron ore which are critical in industries such as construction, automotive, mining, electro-technical, electricity transmission, rail, wire and fasteners industry. The reliance of these downstream industries is not a preference question but rather higher quality and safety specifications. Faced with the prospect of a lack of domestic supply, these downstream industries will have no alternative but to look to import their feedstock, which translates to the loss of much needed domestic jobs, further deepening the unemployment crisis.
The intrinsic nature of risk mitigation for businesses is to act on eliminating potential risks before they become events, meaning that the horse may have already bolted in a number of instances. When import alternatives are bedded down, they are likely to become entrenched thereby structurally altering the industrial landscape permanently, to the detriment of South Africa’s industrialisation aspirations and fortunes.
Of the 362 871 employed in the sector, the downstream industries account for 90% of the employment with the balance being employed in the upstream. This number has evolved from 80% (downstream) and 20% (upstream) over the last 15 years. The sector employed 577 507 people at the peak of 2008. Although the job losses have been felt across the entire value chain, they have mostly been concentrated in the downstream industries, which have accounted for 60.2% of the losses recorded over this period. The point being that the propensity of the sectors employment losses, as a result of the structural vulnerabilities and headwinds faced by the sector, mostly materialise through employment losses in the downstream industries. It is therefore reasonable to conclude that the impact of the plant closures will mostly be felt in the downstream where the bulk of employment resides. Of even greater concern is that a number of companies in the downstream have started estimating the business cases of importing their final product as opposed to semi-finished products (billets, blooms, etc.,) for further processing locally. This will have even wider employment ramifications by eliminating other intermediate processes like forging, galvanising and packaging, thereby converting many existing factories into distribution warehouses.
Another important structural dynamic emanating from the employment trends is a continued decoupling of the relationship between employment and production i.e., increases in production is becoming a less sufficient condition for employment creation. The latest estimates indicate that a 4.7% increase in production is required to induce a 1% increase in employment. An alternative approach to confirm the analysis is the fact that between 2008 and 2023 production has decreased at a rate of -1.3% (CAGR) while employment has decreased at -2.9% (CAGR). Given globalisation and greater levels of mechanisation, this phenomenon is not entirely surprising, however, the data indicates that periods of deep structural adjustment, like the 2007/8 global financial crisis, COVID lockdowns and periods of production disruption as a result of industrial action have tended to worsen the trend. The AMSA plant closures, which will present a major headwind for the sector, followed by a deep and painful structural adjustment, will deepen the decoupling pattern.
In the final analysis, the reasons for the AMSA plant closure are structural, namely: low economic growth, anaemic gross fixed capital formation, electricity and logistics challenges. These are factors faced by companies in the entire value chain and without urgent intervention and reform are unlikely to be resolved in the medium term. It is conceivable therefore that in the absence of reform, the rate of employment declines observed thus far can be projected into the medium term with some modifying factors applied to account for the AMSA closure.
Taking into account the 3500 employees that will be directly affected by the plant closures, projecting the 2.9% (CAGR) rate of decline across the entire steel and engineering sectors employment and applying the steel sector employment multiplier, on a five-year horizon, SEIFSA’s estimates the employment losses could amount to a staggering 293 754 direct and indirect job losses.
This is an outcome that South Africa, given its already untenable unemployment rate, can ill-afford. Doing everything possible to finding lasting solutions to averting the announced plant closures should dominate our and governments agenda, failing which industry and the economy will be left to deal with a catastrophic socioeconomic jobs crisis of unimaginable proportions.
Growing the Economy is the Only way to Fix South Africa
The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) wishes all its member a productive and prosperous 2024, which is likely to be another busy and challenging year, with wage negotiations, general elections, load-shedding, high inflation, geo-political uncertainty and a volatile exchange rate just some of what we can expect.
As the country prepares to go to the polls, we hope that politicians will finally embrace reality and commit to doing what is best for the country and that the many examples of the dysfunctional state of local government can begin to be addressed through the ballot box.
In March it will be a full year since Kgosientsho Ramokgopa was appointed Minister in the Presidency responsible for Electricity in an attempt to solve the country’s energy crisis. With load-shedding being the main growth killer, we desperately need some good news on this front as the rolling blackouts have wreaked havoc on our already fragile economy.
Stats SA data showed that the economy contracted 0.2% in the third quarter of 2023 after two quarters of expansion, and the full-year outlook is for the economy to have grown by a marginal 0.8%. This is not welcome news, given the backdrop of rising unemployment, along with increasing input and energy costs. The contraction also implies less tax revenue for Government, which means even less money to meet its many commitments.
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Treasury’s surprise announcement in early December that it would provide Transnet with a R47bn support package to help it meet its immediate debt obligations, among other commitments, will hopefully go some way towards helping the parastatal resolve its many challenges, which have had a devastating effect on exporters, including steel manufacturers. Also important is the conditionality attached to the bailout, which includes ensuring greater private sector participation in the logistics sector, which will enhance efficiencies through competition.
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Globally, the outlook remains weak, with the risk that interest rates will remain higher for longer adding to an economic environment that is generally unsupportive of economic growth. With the geo-political landscape remaining volatile, uncertainty abounds and impacts negatively on business and investor confidence.
In 2024 SEIFSA will continue to be vocal in articulating the concerns of the Metals and Engineering Sector, both in the media and in meetings with various influential stakeholders, including Government Ministers, as SEIFSA remains convinced that many of the country’s challenges can be best addressed through private-public partnerships. Fixing South Africa can be done one way only: the government and business working hand in hand. The greatest opportunity lies in exploiting private sector participation in public infrastructure delivery through public-private partnerships.
While cognisant of the many issues the country faces, we believe in the fundamental resilience of South Africans and of South Africa and we are ready for another year of service and support for our members.
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On behalf of the SEIFSA Board, Council, Member Associations and Executive we look forward to continuing our collective journey of partnership and success with you in 2024.
Lucio Trentini
Chief Executive Officer
The Collapse of the Steel Master Plan and Disintegration of Industry
The steel industry is the backbone of any economy, it forms the foundation of any modern economy and is essential to every single sector. Without a healthy and vibrant local steel industry, South Africa will simply not be able to integrate and develop itself or the rest of the continent. The steel sector – and South Africa – urgently needs clarity on policies, consensus on action plans and realised deliverables on the ground in order to instil confidence in the viability of the country to boost competitiveness and attract both local and foreign direct investment.
The recent announcement by ArcelorMittal South Africa on the potential closure of its operations in Newcastle and Vereeniging, as well as ArcelorMittal Rail and Structural presents a major set-back to the base of the industrial sector and industrialisation more broadly. This development also raises the sharp question whether the grand aspirations of the Steel Master Plan (SMP) to reindustrialise the steel industry are beginning to disintegrate under our watch. The unfortunate reality is that the lofty goals set by the SMP to charter a roadmap to reenergise the sector, expand production and demand across the steel and fabrication value chain are becoming increasingly illusive. There is a growing sense on the part of industry that the SMP has collapsed.
The SMP was pitched as the platform through which all the stakeholders, namely; government, business and labour, who have a direct and vested interest in seeing this industry prosper, would come together and work collaboratively to meet this end. The plan was sold as a deviation from the old and unproductive approach where government directs the path which industry should take and one where different stakeholders lobby the government toward their respective ends in an unstructured way. It was meant to be a unifying platform, where meaningful and active collaboration took place to arrest the rapid decline currently being experienced by the industry through short-term interventions and to grow the industry through longer dated interventions. Importantly, it was also meant to open avenues of communication and collaboration between all stakeholders.
The metals and engineering industries, and particularly the constituency I represent through the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), fully committed itself to the SMP when it was launched in 2021. SEIFSA was a signatory to the founding document and nominated a number of captains of industry to lead various workstream. The SEIFSA team has invested considerable resources to the work of the SMP unlike some of the nay-sayers that wrote-off SMP at the outset.
Over the last year, SEIFSA has made numerous formal requests for a meeting with the Minister of Trade Industry and Competition on the scrap metal export ban and other much wider and arguably more important and strategic industrial policy concerns. Disappointingly, the meetings have not materialised and our requests have fallen on deaf ears.
We understand and acknowledge that Ministers leading key departments and portfolios are extremely busy, but what we cannot accept is the lack of decisive leadership from the DTIC, resulting in numerous decisions being strung out and not forthcoming. That said, it is ironic that some decisions, like the ban on scrap metal exports – with all its adverse implications – received priority preference and relatively fast decision turn-around times. A further concern to business is the delays in appointing permanent staff to critical decision-making roles. A significant number of DTIC staff, in key decision-making roles, hold them in an acting capacity and this in part contributes to the delays on decision-making.
Public consultation processes on regulations which are often undertaken when it is seemingly clear that a decision has already been taken. This suspicion on the part of business is supported by the unwillingness of the ministry to engage industry on a more in-depth basis on some of the more rational proposals submitted by industry, as in the case of the scrap metal export ban. Moreover, relating to the same scrap metal export ban there has been a very concerning shift in the goal post where the motivation to extend the export ban is now leaning to input cost support for the scrap-based mills and the country’s decarbonisation efforts, whereas the original reasons used to force the decision through were of a security nature and protection of infrastructure. Introducing industrial policy by stealth and misleading economic signals as in this case, renders the SMP as a platform to rubber-stamp and legitimise decisions, including those that do not enjoy support and alignment by a significant block of employers.
Overarching all of this is the fact that the SMP was meant to deliver a comprehensive industrial policy framework, where a total industry perspective would be taken and complementarities across the value chain enhanced. Sadly, what we are witnessing is the opposite, wherein policy is implemented in a fragmented manner, with a short-term view and with pockets of industry being pit against one another. The scrap metal export ban is one such divisive and market distorting development.
The industry is quickly losing faith in the SMP process and it is obvious but worth mentioning that the withdrawal of this constituency from the SMP would virtually render the plan moot.
Industry simply cannot continue to invest the amount of time, effort and resources as it has done thus far for altruistic reasons, particularly when the experienced reality is one of a continued deterioration of the business and operating environment, company closures and job losses.
Elias Monage
SEIFSA President
The collapse of the Steel Master Plan and disintegration of industry
The steel industry is the backbone of any economy, it forms the foundation of any modern economy and is essential to every single sector. Without a healthy and vibrant local steel industry, South Africa will simply not be able to integrate and develop itself or the rest of the continent. The steel sector – and South Africa – urgently needs clarity on policies, consensus on action plans and realised deliverables on the ground in order to instil confidence in the viability of the country to boost competitiveness and attract both local and foreign direct investment.
The recent announcement by ArcelorMittal South Africa on the potential closure of its operations in Newcastle and Vereeniging, as well as ArcelorMittal Rail and Structural presents a major set-back to the base of the industrial sector and industrialisation more broadly. This development also raises the sharp question whether the grand aspirations of the Steel Master Plan (SMP) to reindustrialise the steel industry are beginning to disintegrate under our watch. The unfortunate reality is that the lofty goals set by the SMP to charter a roadmap to reenergise the sector, expand production and demand across the steel and fabrication value chain are becoming increasingly illusive. There is a growing sense on the part of industry that the SMP has collapsed.
The SMP was pitched as the platform through which all the stakeholders, namely; government, business and labour, who have a direct and vested interest in seeing this industry prosper, would come together and work collaboratively to meet this end. The plan was sold as a deviation from the old and unproductive approach where government directs the path which industry should take and one where different stakeholders lobby the government toward their respective ends in an unstructured way. It was meant to be a unifying platform, where meaningful and active collaboration took place to arrest the rapid decline currently being experienced by the industry through short-term interventions and to grow the industry through longer dated interventions. Importantly, it was also meant to open avenues of communication and collaboration between all stakeholders.
The metals and engineering industries, and particularly the constituency I represent through the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), fully committed itself to the SMP when it was launched in 2021. SEIFSA was a signatory to the founding document and nominated a number of captains of industry to lead various workstream. The SEIFSA team has invested considerable resources to the work of the SMP unlike some of the nay-sayers that wrote-off SMP at the outset.
Over the last year, SEIFSA has made numerous formal requests for a meeting with the Minister of Trade Industry and Competition on the scrap metal export ban and other much wider and arguably more important and strategic industrial policy concerns. Disappointingly, the meetings have not materialised and our requests have fallen on deaf ears.
We understand and acknowledge that Ministers leading key departments and portfolios are extremely busy, but what we cannot accept is the lack of decisive leadership from the DTIC, resulting in numerous decisions being strung out and not forthcoming. That said, it is ironic that some decisions, like the ban on scrap metal exports – with all its adverse implications – received priority preference and relatively fast decision turn-around times. A further concern to business is the delays in appointing permanent staff to critical decision-making roles. A significant number of DTIC staff, in key decision-making roles, hold them in an acting capacity and this in part contributes to the delays on decision-making.
Public consultation processes on regulations which are often undertaken when it is seemingly clear that a decision has already been taken. This suspicion on the part of business is supported by the unwillingness of the ministry to engage industry on a more in-depth basis on some of the more rational proposals submitted by industry, as in the case of the scrap metal export ban. Moreover, relating to the same scrap metal export ban there has been a very concerning shift in the goal post where the motivation to extend the export ban is now leaning to input cost support for the scrap-based mills and the country’s decarbonisation efforts, whereas the original reasons used to force the decision through were of a security nature and protection of infrastructure. Introducing industrial policy by stealth and misleading economic signals as in this case, renders the SMP as a platform to rubber-stamp and legitimise decisions, including those that do not enjoy support and alignment by a significant block of employers.
Overarching all of this is the fact that the SMP was meant to deliver a comprehensive industrial policy framework, where a total industry perspective would be taken and complementarities across the value chain enhanced. Sadly, what we are witnessing is the opposite, wherein policy is implemented in a fragmented manner, with a short-term view and with pockets of industry being pit against one another. The scrap metal export ban is one such divisive and market distorting development.
The industry is quickly losing faith in the SMP process and it is obvious but worth mentioning that the withdrawal of this constituency from the SMP would virtually render the plan moot. Industry simply cannot continue to invest the amount of time, effort and resources as it has done thus far for altruistic reasons, particularly when the experienced reality is one of a continued deterioration of the business and operating environment, company closures and job losses.
Elias Monage
SEIFSA President
Closure of Steel Production Capacity at ArcelorMittal will have devastating implications for South Africa and the Continent
Johannesburg, 29 November 2023. The announcement by ArcelorMittal South Africa on the closure of its operations in Newcastle and Vereeniging, as well as ArcelorMittal Rail and Structural will have a devastating impact on a number of fronts. These include the 3500 employees likely to be affected, the surrounding communities, suppliers, contractors and the broader metals and engineering sector.
Downstream industries are heavily reliant on the long-products that come from these plants to which a switch-over will not happen overnight. Even where these products can be imported this will result in the exporting of jobs that are desperately needed in South Africa. Moreover, the logistics challenges facing the country raise serious questions whether port and rail infrastructure can get product to the end manufactures.
A slow economy and difficult trading environment, high transport, logistics and energy costs, exacerbated by logistic failures and their resultant cost implications, the introduction of a preferential pricing system for scrap, a 20% export duty and more recently a ban on scrap exports have all played a major role in contributing to the current state of affairs. Compounding this is the DTIC’s blinkered and narrow focus on how best to create an enabling environment conducive to growth, stability and job security. SEIFSA has repeatedly warned that the decisions relating to the scrap metal policy and its industrial policy consequences will yield casualties. What we are seeing unfolding at ArcelorMittal feeds directly into these warnings.
SEIFSA’s acting for and on behalf of its broader membership, which make up by far the most representative voice of both the upstream and downstream value chains in the metals and engineering industry, is firmly of the view that these and related industrial policy matters be urgently escalated to the Economic Cluster of Ministries, as it seems that the DTIC seemingly does not have the capacity, nor the grasp of the broader implications of these developments.
The matter is now beyond urgent and we urge the President and key Ministers in the Economic Cluster to treat it as such, if we are to avoid a socio-economic catastrophe of gigantic proportions in the metals and engineering industry which will reverberate throughout the economy and the continent, impacting the auto, motor, construction and mining sub-sector of the economy and all who work in it.
The reconstruction and recovery of the South African economy and more specifically the metals and engineering industry must be looked at in the wider context of reindustrialising critical sectors, along with all the other challenges facing the economy from energy and logistics to the water infrastructure and crime.